How Much Do I Need To Have Saved For Retirement?

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Last Updated on November 30, 2020 by Emma @ Making and Saving Money

In our younger years, it’s so easy to neglect our responsibilities to make financial plans for the future, and for a time when we may no longer want or be able to work. There always seems to be something more pressing to pay for; a new car, a house deposit, a holiday, a wedding, a young family.

The challenge is that the longer we put our financial plan for retirement on hold, the more we will have to contribute each month and year to reach our desired standard of living in the future. The more years that you have funds invested in a pension (UK) or 401k (US), the more time we give for the markets and compound interest to do their thing!

So how do we decide how much money to have saved before we retire and how much should we be saving by age?

This post contains affiliate links. If you decide to use them, my blog may earn a small commission at no additional cost to you, which helps to fund more helpful articles for you to enjoy. Find out more in my Affiliate Disclosure. Nothing in this article constitutes financial, or other, advice. These are my views and the results of years of research, testing and learning. When you’re investing, the value of your investments can increase and decrease so you may end up receiving less than you invested.

How much money should you have saved up before you retire?

The amount of money that you need on hand for retirement depends on what sort of lifestyle you want to have in retirement, for example:

  • Would you like to continue your current lifestyle?
  • Do you envisage needing less money as you plan to live a simpler lifestyle? Perhaps by retirement you’ll have all your debts paid off, and you have no plans to travel extensively or take up costly hobbies.
  • Do you want to build and sustain more luxury in your life between now and retirement? Perhaps you want to live life to the full and head off on a world tour.


Once you have decided on your ideal lifestyle, spend some time calculating your expected annual expenses of this way of living, many people then multiply this figure by 25 times to get an approximate retirement fund number. This approach is a popular method used by the FIRE (Financial Independence Retire Early) community who believe that this level of investment in the stock market you should be able to extract around 4% of your investments annually, adjusting for inflation in future years, and have enough to live on for at least 30 years. This approach is known as the four per cent rule.

How much should you have saved for retirement by age?

Many factors affect how much money you should have invested for retirement at different stages of your life, including:

  • The lifestyle you want to have in retirement and therefore the income you need in retirement
  • How you are investing for retirement – for example, if you are planning to save money in a low-interest savings account you would have to invest a lot more than someone who makes long-term investments in an adequately managed retirement fund, such as a workplace pension or a 401k, or even index funds
  • The age you would like to retire at
  • Whether you plan to retire fully or to continue with part-time work or other income-generating activities
  • Whether you are a single person or not.

There are several online calculators available to help you to work out how much you need to invest for a comfortable retirement based on your circumstances, including:

If you’d like an even more straightforward calculation to get a sense of whether you are on track or not, Fidelity International completed some research into retirement savings in the UK November 2018. The study gave the following income multiples as a rough guide of what you should invest by age to maintain your working life standard of living. The multiples are based on a household of two adults who qualify for a state pension:

Age and Income multiple

  • Age 30: 1 x income
  • Age 40: 2 x income
  • Age 50: 4 x income
  • Age 60: 6 x income
  • Age 68: 7 x income

Why save for retirement?

We’ve considered how much money you need for retirement, but why save for retirement in the first place? Is it necessary?

Research from, the UK’s largest online directory of qualified professionals, found that a sixth of individuals aged over 55 in the UK have no retirement savings, with many hoping to live on around £20, 000 per year. Despite these financial goals without a private pension, the majority will have to try to make ends meet through the UK state pension which currently amounts to just £9,110 a year. Without a private pension, retirement savings or other types of guaranteed income (such as property rental income), you are on a course to working your entire life, or retiring into poverty.

The study found that a quarter of under 35s were making no financial contribution towards their retirement. This group are missing out on years of potential growth in the stock market and the benefits of compound interest from a young age. If they want to catch up, they’ll have to make far higher contributions to their pension investments and savings in later life to achieve the same level of retirement savings as they could have achieved with smaller contributions from a younger age.

Save for retirement

How can I get started with retirement saving?

In the UK, if you have a job, your employer must automatically enrol you into a workplace pension by law if you meet the following criteria:

  • You are aged between 22 and the state pension age
  • Not already a member of a qualifying pension scheme
  • Earning more than £10, 000 a year
  • Employed in the UK

Your plan will provide an income in retirement from your designated retirement date. You should receive a regular pension statement that summarises the current value of retirement plan pot and your expected pension income at your target retirement age.

Alongside the state pension, workplace plans and other private pension schemes, people save for retirement in a variety of ways including:

Pensions and ISAs attract tax relief in the UK. If you’re not sure which is the best option for you, you can work with a financial adviser to run through the specifics of your situation and make sure you are investing and saving enough for your target retirement income.

How much money do I need for a comfortable retirement?

A popular view is that if you are satisfied with your lifestyle while working, then you would need a retirement income of 75% to 80% of your pre-retirement income to be happy. So according to this model, if you currently have a £50,000 annual income, you would need a retirement income of £37,500 to £40, 000 a year.

It can be challenging to know whether you are on track to have a large enough pension pot and annual income in retirement. To check track of your progress, make sure to review your pension at least annually by reviewing the statement your provider sends you, or logging into your online account.

You can also use tools such as Unbiased’s pension calculator to see if you are on track.

What if I am off track with my pension savings?

If you are late starting retirement planning or your current pension savings pot is not on track to deliver the income you’ll need, it’s not too late to improve your situation. You can consider the following options to increase your pension savings at any age:

  • Decrease your expenses. See Tips to Start Saving Money for many ideas on how to save money
  • Increase your income. You could do this through starting a side hustle, taking on another part-time job, seeking a promotion, finding a better-paid job, or negotiating a salary increase in your current position
  • Consider pushing back your year of retirement so that you have more years of pensions contributions
  • Consider decreasing your expenses during retirement so you can live on a smaller pot of money.

What if I want to retire early?

As long as you have sufficient retirement savings that you can access by the date you want to retire, then you can stop working before the standard ages of 65 or 68. You may change your mind about how long you want to stay working in your job if you have a change in health, or other personal circumstances or you just get bored of the same lifestyle.

Retire early

Some workplace pensions may have terms and conditions that prevent you accessing them before an average retirement age such as 55 or older, and you won’t qualify for the state pension until you reach the state pension age. This lack of flexibility is why some people also like to save for retirement with ISAs, index funds and property.

Members of the Financial Independence Retire Early (FIRE) community live a lifestyle that is optimised to enable them to retire as early as in their 20s. Reaching financial independence doesn’t necessarily mean that they stop working at this age; they may reduce their hours or continue working the same amount, just with the knowledge that they no longer have to keep working. To find out more, you can read What is the FIRE Financial Movement?

Conclusion: the sooner you start, the more time your pension savings have to grow

As we’ve discussed, the amount you need to save per year, depends on your target date to stop working, how old you are now, the lifestyle you’d like and how you are investing your money. Typically a standard savings account won’t attract sufficient interest to provide all the money you’ll need, so pensions include investment funds with different levels of risk that they tailor to the age and risk appetite of the investor.

The sooner that you create a plan for your future and start investing, the longer compound interest will have to deliver its magic, which will overall reduce the amount that you need to contribute. Paying into a pension directly from your salary each month will automate your savings in a tax-efficient way. You can also explore setting up a standing order into an ISA or other investment vehicle.

A financial professional can help you to get the benefits of any tax advantages of specific investments and sources of income. A good one should pay for themselves quickly if you stick to the plan you create together.

You might also find calculators such as R:IQ helpful in keeping track of your progress.

Frequently Asked Questions

What if I’m on a low salary and not saving enough for retirement?

It can be challenging to have a robust retirement plan if you are earning a low income, but there are always options to generate the income you might need for retirement. Your options include:

  • Starting a side hustle to boost your earnings now. See Best Side Hustles for lots of ideas on how to do this
  • Decreasing your expenses, so you make the most of the income that you have. See Top Tips for Saving money for some practical ways to increase your savings rate
  • Finding a job with a higher salary
  • Negotiating an increase to your salary
  • Finding a part-time job to boost your current salary

Unless you find a way to contribute more, you might have to stay working for longer to reach your goals, or live a more basic lifestyle in later life.

Can I have a pension if I don’t qualify for one at work?

If you are a UK resident, depending on your age, you may qualify for the Basic State Pension or the New State Pension. At the time of writing, this amounts to £9,110 per year, which may be less income than you need to retire.

If you don’t qualify for a pension from your workplace, for example, if you are self-employed, then you could contact a financial adviser to establish a private pension. The advisor will help you to calculate how much you need to invest to reach your target pension pot by your target retirement date.

How much do I need to save in my pension pot?

The amount that you need to save in your pension pot, whether that’s a workplace-provided pension, a private pension, index funds, ISAs or property, depends on several factors including:

  • The age you want to stop working
  • The other sources of income you will have in retirement if any, for example, if you plan to continue working, or will have property rental income, or if you plan to sell off some of your assets
  • How much income you ‘ll need to live a comfortable lifestyle.

You can hire a financial adviser to come up with a plan for how much you need to be saving today to reach your goals, or you can use one of the various online calculator tools.

Do I need to save more for retirement as a single person?

As a single retired person, you will be relying solely on your income, and you may not have anyone to split your costs of living with, which could push up the amount of pensions or other savings that you need. However, it could be the case that you want a more simple lifestyle than the typical couple, or perhaps you intend on living with someone else. The amount you need to invest and need to pay into a pension depends on a range of factors.

What is compound interest?

Compound interest helps you to make more money, the longer you have funds invested for, as you earn interest on the interest you have already accumulated.

The easiest way to explain the concept is with an example:

If you invested £10,000 into an account that promised 5% simple interest on your initial investment annually and you kept your investment for 30 years, you would earn £500 a year, or £15,000 over the full 30 years. Imagine that in this case, the interest moves to another account that does not attract interest.

Compare this with a model where the 5% interest compounds annually. In year two you are earning 5% on £10,500, in year three you earn interest on £11,025 and so on until your account is worth £43, 219.42 in 30 years, without having made any further contributions.

Imagine now that alongside the compound interest at 5%, you are also contributing £200 a month. Now your investment account has £202,672.66 available after 30 years.

Now let’s imagine that instead of investing the £10,000 and making £200 monthly contributions for 30 years, you start investing earlier and keep the money in the account for an additional ten years. Your account is now worth £360,319.35 after 40 years, and you have only contributed £106,000 of that.

It’s clear to see that the earlier the invest and the more your contribute every month, the more magic compound interest can work. The magic of compound interest will be at work in your pension pot, bringing you closer to the amount you need to retire.

However, it’s important to remember that if you have funds invested in the stock market, returns can rise and fall. If you take your money out during a market crash, then it’s possible to lose the initial value of your investment. If we invest for the long term and avoid cashing out in downturns, then most people believe you can be confident of a good return.

Where can I get help with my pension?

The following organisations offer free support and guidance on money matters relating to retiring as UK citizen:

You might also decide to hire someone who can provide independent regulated financial advice to you. Some pension plans include a provision to pay for advice. You can find qualified professionals with good reputations through the following websites:

What are your experiences with saving for retirement?

Did you start retirement planning young, or are you playing catch up?

When would you like to retire?

Would you stay working after achieving financial independence?

Have you retired already? What tips do you have for people who are planning for later retirement?


We’d love to hear from you below!

4 thoughts on “How Much Do I Need To Have Saved For Retirement?”

  1. I was fortunate to be able to take early retirement in my 50’s using my company pension and doing consultancy work to build up some reserves
    It worked well but the problem was often you do the work but when do you get paid? Not much fun when you are due payment at the end of a job after several months and they delay your payments. Fortunately two small companies I worked for were brilliant payers on time etc
    Budgets are critical and initially avoid any major purchases until they are essential . We kept our old car going for 19 years
    I had a years notice before being made redundant so I used this to save as much as possible in an ISA and I put some of my income into the company AVC scheme
    Attend a pensions seminar and responsible companies should help staff who are made redundant
    Cultivate your contacts you may be able to do part time work with them
    Most of my consultancy work came from people who knew me from working with them before and had trust in me
    De clutter your house and maybe get some cash for essentials and treats
    Retirement takes a lot of adjustment so I wound down my consultancy work two years before retirement
    By this time my state pension came in and we had lower bills with the mortgage paid off. So I could gradually wind down and adapt to the new status
    Keep mentally as well as physically active. Too many people save up for retirement and don’t get to spend it as they deteriorate after retiring
    Budgeting is critical and I use an Excel spreadsheet to log savings outcomings in income. Then we can budget on holidays as and when we can do them again
    Save your £‘s for holidays in UK instead of spending hard earned savings travelling oversees
    There is no complex equation to this just use common sense and don’t waste. Definitely don’t look at equity release as the companies who offer this are not charities and could cause no end of potential problems when it comes to inheritance


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